Money Back Policy

A money back policy is a type of life insurance plan that provides periodic returns to the policyholder during the policy term, along with a maturity benefit and life cover. This plan ensures financial liquidity by offering regular payouts, making it suitable for individuals seeking both protection and periodic income.

What is a Money Back Policy?

A money back policy is a life insurance plan that combines insurance coverage with investment benefits. Unlike traditional endowment plans, it offers regular payouts, known as survival benefits, at predetermined intervals during the policy term. If the policyholder survives the policy term, they receive the remaining sum assured as a maturity benefit. In the unfortunate event of the policyholder's demise during the policy term, the nominated beneficiaries receive the full sum assured, regardless of the survival benefits already paid.

How Does a Money Back Policy Work?

Upon purchasing a money back policy, the policyholder commits to paying regular premiums for a specified term. During this term, the insurer provides survival benefits at regular intervals, which are a percentage of the sum assured. At the end of the policy term, the remaining sum assured, along with any accrued bonuses, is paid as the maturity benefit. If the policyholder passes away during the policy term, the full sum assured is paid to the beneficiaries, ensuring financial security for the family.

Here is an example to understand this better.

Consider a 20-year money back policy with a sum assured of ₹10 lakhs. The policy might offer 20% of the sum assured every five years as survival benefits. Thus, the policyholder would receive ₹2 lakhs at the end of the 5th, 10th, and 15th years. At the end of the 20th year, the remaining ₹4 lakhs, along with any bonuses, would be paid as the maturity benefit. If the policyholder dies during the policy term, the full sum assured of ₹10 lakhs is paid to the beneficiaries, irrespective of the survival benefits already received.

Key Features of Money Back Policies

A money back policy is a unique life insurance plan that provides periodic payouts during the policy term while ensuring life coverage. Here are its key features:

Periodic Survival Benefits:
One of the standout features of a money back plan is that it offers regular payouts at predefined intervals, providing liquidity throughout the policy tenure. This makes it an ideal choice for those who need periodic income for financial commitments.
Life Cover Throughout the Policy Term:
A money back life insurance policy ensures that the policyholder remains covered throughout the tenure. In the event of the policyholder’s demise, the full sum assured is paid to the nominee, regardless of the payouts already received.
Guaranteed Maturity Benefit:
At the end of the policy term, the remaining sum assured, along with any accumulated bonuses, is paid as a guaranteed money back plan maturity benefit. This helps in long-term financial security.
Death Benefit for Policyholder’s Family:
In case of the policyholder’s unfortunate demise during the policy tenure, the full sum assured is paid to the beneficiaries, ensuring financial protection.
Bonus Additions:
Many money back policies offer bonuses, including reversionary and terminal bonuses, which increase the total payout received.
Risk-Free Savings with Insurance Benefits:
Unlike market-linked investments, a money back policy provides a safe and secure savings option with life coverage, ensuring financial stability.
Tax Benefits:
Premiums paid for a money back life insurance qualify for deductions under Section 80C, and maturity proceeds are tax-free under Section 10(10D).

These features make a money back plan an excellent choice for those seeking periodic income, insurance protection, and financial security.

Benefits of Money Back Policies

A money back policy is not just about providing life cover; it also offers a wide range of benefits that make it an attractive option for individuals looking for financial security and regular income. With guaranteed survival benefits, tax advantages, and a comprehensive life cover, these policies serve as a reliable tool for both short-term financial planning and long-term wealth creation. Below are the key benefits that make money back policies a favoured choice among investors:

Financial Liquidity:
The periodic payouts ensure a steady flow of income, assisting in meeting short-term financial goals or unexpected expenses.

Tax Benefits:
Premiums paid towards a money back policy qualify for tax deductions under Section 80C of the Income Tax Act. Additionally, the survival benefits, maturity proceeds, and death benefits are tax-exempt under Section 10(10D), subject to prevailing tax laws.

Life Cover:
Provides life insurance coverage throughout the policy term, ensuring that the family is financially protected in the event of the policyholder's demise.

Maturity Benefit:
At the end of the policy term, the policyholder receives the remaining sum assured along with any accrued bonuses, aiding in long-term financial planning.

Death Benefit:
In the unfortunate event of the policyholder's death during the policy term, the full sum assured is paid to the beneficiaries, regardless of the survival benefits already disbursed.

Risk-Free Savings Option:
Combines the dual benefits of insurance and savings, offering a low-risk avenue for wealth accumulation with the added advantage of life cover.

Who Should Buy a Money Back Policy?

Individuals Seeking Regular Income:
Those who desire periodic returns to meet short-term financial goals.

Risk-Averse Investors:
Individuals looking for a low-risk investment option with the added benefit of life cover.

Young Professionals:
Those starting their careers and looking to build a disciplined savings habit while securing life insurance coverage.
Parents Planning for Child's Future:
Parents aiming to secure funds for their child's education or other significant life events.

Types of Money Back Policies

There are several types of money back policies available to suit different financial goals and needs. Each type offers unique features, including varying premium structures, payout schedules, and investment opportunities. Below are some common types of money back plans that can be considered based on individual preferences:

Traditional Money Back Policy:
The traditional money back life insurance policy offers fixed survival benefits at regular intervals during the policy term. It provides guaranteed returns, life cover, and bonus payouts, ensuring both financial protection and savings.
Unit-Linked Money Back Policy:
A unit-linked money back plan combines the benefits of insurance and market-linked investments. A portion of the premium is invested in mutual funds, offering the potential for higher returns along with periodic payouts. This type of policy is suitable for individuals willing to take some investment risk for potentially higher returns.
Children’s Money Back Policy:
A money back life insurance policy for children ensures financial protection for their future. The payouts are scheduled to align with major milestones like educational expenses, making it an ideal plan for parents planning for their child's future education or marriage.
Retirement Money Back Policy:
A money back plan specifically designed for retirement offers regular payouts after retirement, ensuring a steady income stream post-retirement. This type of policy is ideal for those looking for a regular income after their working years.
Limited Premium Payment Money Back Policy:
This policy allows the policyholder to pay premiums for a shorter period, such as 5 or 10 years, while receiving payouts and coverage for a longer term. It’s a great option for those who want to reduce the premium payment burden while securing life cover.

Choosing the right money back policy depends on your financial objectives, risk appetite, and the kind of returns you are looking for. Understanding the types of policies available can help you make a well-informed decision to secure your future.

Factors to Consider Before Buying a Money Back Policy

Before purchasing a money back policy, it's essential to carefully evaluate several factors to ensure it aligns with your financial goals and needs. Here are the key aspects to consider before committing to a money back plan.

Premiums Affordability:
First and foremost, assess the affordability of the premiums. Ensure that the premiums for the money back life insurance fit comfortably within your budget without straining your finances. Keep in mind that paying premiums consistently is crucial for the policy to remain active and offer its benefits.

Returns and Bonuses:
Evaluate the returns provided by the money back plan, including the survival benefits and maturity payout. Check for any additional bonuses or loyalty additions offered by the insurer, as these can significantly enhance the overall returns. Comparing returns across different policies will help you choose the one that offers the best value.

Financial Goals:
Consider your long-term and short-term financial objectives when selecting a money back policy. Whether you’re planning for your child’s education, saving for retirement, or securing your family’s future, the policy should align with your specific financial goals.

Additional Benefits and Riders:
Look for money back policies that offer additional benefits, such as critical illness cover or accidental death riders. These add-ons enhance the coverage, providing extra protection against unforeseen circumstances.

Payout Schedules:
Different money back plans offer different payout schedules. Choose a policy that provides payouts at intervals that suit your financial needs. Whether you need yearly, quarterly, or lump sum payouts, the schedule should match your goals.

Insurer’s Reputation:
Finally, research the reputation of the insurer offering the money back policy. Choose a reliable insurer with a strong track record in customer service and claim settlement.

Riders and Add-Ons:
Adding riders to your money back policy can significantly enhance its coverage and provide extra benefits tailored to your needs. Riders are additional provisions or options that can be added to a standard life insurance policy for more comprehensive protection.

Riders and Add-Ons for Enhanced Coverage

Enhancing your money back policy with riders and add-ons can provide additional financial protection. Some common riders include:

Accidental Death Benefit Rider:
Provides an extra payout if the policyholder passes away due to an accident.
Critical Illness Rider:
Offers a lump sum amount upon diagnosis of specified critical illnesses like cancer or heart disease.
Waiver of Premium Rider:
Ensures that in case of disability or critical illness, future premiums are waived while the policy remains active.
Disability Benefit Rider:
Provides financial support in case of permanent disability caused by an accident.
Income Benefit Rider:
Ensures a steady income for the nominee in case of the policyholder’s untimely demise.

Adding these riders can enhance your policy’s benefits and provide greater financial security.

How to Choose the Right Money Back Policy?

When selecting the best money back policy, consider the following factors:

Assess Your Financial Goals:
Determine if you need regular payouts for short-term financial needs or long-term wealth creation.
Compare Policies:
Review multiple plans to find a guaranteed money back plan that best suits your requirements.
Check the Payout Frequency:
Choose a policy that aligns with your financial needs and expected payout schedule.
Evaluate Premium Affordability:
Ensure that the premium fits within your budget without financial strain.
Review Bonus and Returns:
Check for policies that offer loyalty additions or bonuses to maximise your returns.
Consider Add-Ons:
Look for additional riders that enhance your money back life insurance coverage.

Why Choose IndiaFirst Life’s Money Back Policy?

IndiaFirst Life offers some of the best money back policy options in India. Here’s why you should consider their plans:

Regular Income Benefits:
Ensures financial liquidity with periodic payouts.
Guaranteed Returns:
Secure a guaranteed money back plan with fixed returns and bonuses.
Comprehensive Life Cover:
Provides financial security for your family.
Tax Benefits:
Enjoy tax exemptions on premiums and benefits received.
Flexible Payouts:
Choose from multiple payout schedules based on your financial needs.
Optional Riders:
Enhance your coverage with critical illness, accidental death, or disability riders.

IndiaFirst Life’s money back life insurance policy is an excellent choice for those seeking a balance of life protection and financial returns.

FAQs on Money Back Plans

View All FAQ

Understanding Money Back Plans
Tax Implications of Money Back Plans
Purchasing Money Back Plans
Managing Money Back Plans

What is the difference between a Money Back Policy and a Term Insurance Plan?

Answer: A money back policy provides periodic payouts and life coverage throughout the policy term, while a term insurance plan only offers a death benefit and no survival benefits. The money back plan is a combination of insurance and savings.

Is it risky to invest in money back policy?

Answer: A money back policy is considered low risk as it offers guaranteed returns, life cover, and survival benefits. However, returns may be lower compared to market-linked investments. It is ideal for conservative investors seeking safety.

What are the tax benefits with money back plans?

Answer: Premiums paid for a money back policy qualify for deductions under Section 80C of the Income Tax Act. Additionally, the maturity benefit is tax-free under Section 10(10D), making it a tax-efficient investment option.

Is money back policy taxable?

Answer: Maturity benefits from a money back policy are tax-free under Section 10(10D) of the Income Tax Act, provided the premium is within the specified limits.

Is the amount received through money back policy taxable?

Answer: The maturity benefits from a money back policy are generally tax-free under Section 10(10D), provided the premium paid does not exceed 10% of the sum assured. However, if premiums are higher, tax may apply.

Whom will a money back policy suit best?

Answer: A money back policy is ideal for those looking for a combination of life cover and savings with periodic payouts. It is suitable for individuals seeking financial security and regular income, such as parents planning for their child’s future.

What are the eligibility criteria to buy money back policy?

Answer: To purchase a money back policy, the policyholder typically needs to be between 18 to 65 years old, with the ability to pay premiums based on the policy term. Specific criteria vary by insurer.

What are the riders available in a money back policy?

Answer

Common riders available in a money back policy include:

• Accidental Death Benefit Rider – Additional payout in case of accidental death.

• Critical Illness Rider – Lump sum payout if diagnosed with critical illnesses like cancer.

• Waiver of Premium Rider – Waives future premiums if the policyholder becomes disabled or critically ill.

• Income Benefit Rider – Provides regular income to the nominee in case of death.

What if I fail to pay my money back policy premium?

Answer: If premiums are missed, the money back policy may lapse or become a paid-up policy depending on the insurer's terms. You can reinstate the policy by paying the due premiums within a specified grace period.

How to transfer my money back policy?

Answer: To transfer a money back policy, the policyholder must submit a request to the insurer, providing details about the transferee. The insurer will evaluate and approve the transfer, which typically involves paying a nominal fee.

How are returns calculated on your money back policies?

Answer: Returns on a money back policy are calculated based on the sum assured, survival benefits, and any accumulated bonuses. The insurer adds bonuses (reversionary bonus or terminal bonus) to the policy, increasing the final maturity benefit. These returns are generally lower than market-linked products but offer stability and guaranteed payouts. The maturity benefit is the sum assured plus bonuses, providing a risk-free savings option.